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Inconsistencies between telecom regulations prescribed by the Telecom Regulatory Authority of India (TRAI) and GST provisions have exacerbated compliance complexities. A notable example is the issue in determining the place of supply for roaming charges.
Over the past two decades, India has witnessed an unprecedented surge in mobile and internet penetration, transforming the way its population communicates, consumes information, and conducts business. This transformation has been fuelled by progressive policies, technological advancements, and fierce competition among telecom giants competing to capture the booming market.
According to GSMA (Global System for Mobile communications Association), India is projected to become the world's second-largest smartphone market by 2025, with approximately 1 billion devices in use. By the same year, the country is expected to have 920 million unique mobile subscribers, including 88 million 5G connections. Furthermore, it is estimated that 5G technology will contribute around USD 450 billion to the Indian economy from 2023 to 2040.
The telecom industry in India, renowned for its rapid growth and innovation, has encountered significant hurdles under the GST regime. One of the most pressing issues is the non-availability of input tax credit (ITC) on the procurement of petroleum products, which has created a cascading effect. Under GST, telecom operators are unable to offset the Central Excise and VAT paid on the procurement of petroleum products, leading to increased operational costs and reduced competitiveness in the global market.
Another critical challenge stems from restrictions on claiming ITC for goods and services used in the construction of telecommunication towers. This restriction has imposed a substantial financial burden on industry players, hindering infrastructure expansion and modernisation efforts, which are crucial for meeting growing consumer demands.
Moreover, inconsistencies between telecom regulations prescribed by the Telecom Regulatory Authority of India (TRAI) and GST provisions have exacerbated compliance complexities. A notable example is the issue in determining the place of supply for roaming charges.
These challenges underscore the need for a nuanced approach to GST reforms tailored to the unique requirements of the telecom sector. Addressing these critical areas through policy reforms that enable seamless ITC utilisation, clarification on regulatory ambiguities, and alignment of GST provisions with industry-specific regulations would be pivotal. Such reforms are essential not only for sustaining the industry's growth trajectory but also for reinforcing India's position as a leader in digital connectivity and innovation on the global stage.
In conclusion, while the telecom industry continues to thrive amidst technological advancements and increasing consumer demand, resolving GST-related challenges is a key to foster a conducive business environment and unlock the industry's full potential in driving India's digital economy forward.
As India braces for the upcoming budget, the telecom industry needs to lobby vigorously for key exemptions and relief measures aimed at fostering growth and innovation. At the forefront of their demands are calls for exemptions from basic customs duty (BCD) on critical telecom equipment like IP radios and LTE products. These components are essential for the seamless rollout of advanced 5G networks, a cornerstone of India's digital infrastructure ambitions.
Lastly, discussions surrounding the potential inclusion of petroleum products under the GST framework indicate broader efforts towards tax reform and economic efficiency.
The telecom sector's proposals for exemptions and relief could have profound implications across several critical areas. Firstly, if exemptions from GST on license fees and spectrum usage charges are granted, telecom operators could potentially lower their financial burdens, allowing them to allocate more resources towards network expansion, infrastructure upgrades, and technological innovations.
Secondly, clarity on GST payment procedures for spectrum usage charges paid in installments is essential which is expected to be issued in light of the recent GST Council meeting.
Regarding the inclusion of petroleum products under the GST framework, if implemented, it would mark a significant stride towards comprehensive tax reform and eliminate cascading effects.
Overall, these proposed GST reforms could create a more conducive business environment for India's telecom industry. However, the successful implementation of these proposals hinges on effective coordination between industry stakeholders, policymakers, and regulatory bodies to ensure optimal outcomes for all stakeholders involved in India's telecom landscape.
In summary, the industry's agenda looks like securing duty waivers and GST exemptions to drive technological advancements and financial sustainability. These measures not only aim to bolster industry competitiveness but also align with India's broader economic goals of digital transformation and regulatory clarity.
This article first appeared in ET Telecom.com on 10 Jul 2024.
